Fixed vs. Hourly Rates: Which Is Better For Freelancers?

When you start out on sites like Upwork (formerly oDesk/Elance), you'll start to see a few different options when it comes to applying for jobs. Some clients will stipulate a fixed price job while others will choose to pay an hourly rate.

To really understand which is better, you first need to understand the difference between fixed vs. hourly rate jobs, what that means, and how Upwork treats each type of payment.

There are some pros and cons to both of these options that you definitely need to be aware of, for obvious reasons, as you're about to find out!

Which Is Better – Fixed vs. Hourly Jobs?

Pros of Fixed Priced Jobs

Lump sum payment, can price based on a per project basis rather than hourly basis
Can choose to have an upfront payment before commencing the work (stipulate any percentage)
Client can pay you more than agreed upon at time of job completion

Pros of Hourly Priced Jobs

Guaranteed payment by Upwork of hours completed via the Upwork Team Manager (take screenshots to prove what you've done)
Get paid exactly for the hours you've worked weekly
You choose the rate when you apply for a role (you can adjust it at any time as well)

Cons of Fixed Priced Jobs

Payment is can be delayed if the client decides they are not happy with your work or if they forget to sign off on what you've submitted. You are relying on the client to pay you in good faith (if they don't pay, you can lodge a complaint with Upwork however and leave bad feedback about them, which cannot be removed by them). While Upwork holds the money in Escrow (which they have to pay to Upwork once the job commences), it cannot be released until the client says so.
Payment is not available for withdrawal until the following week
Client can choose to pay you less than agreed upon

Cons of Hourly Priced Jobs

Payment is delayed while the client reviews your Upwork Team Manager screenshots. This takes one week, which means your payment is not available till the following week – you're always paid in arrears
The client can further delay your payment if they dispute any of your screenshots, so be sure you are only working on their project when this is turned on

If you're just starting out on any freelancing site, hourly priced jobs are your best and safest bet. They ensure that you will get paid for the work that you do and there is no risk associated with this option.

However, as you'll quickly learn, a lot of clients do prefer to use a fixed priced method. This way, they know exactly how much the project will cost them and there are no hidden expenses.

There is a caveat to the hourly rate though – clients can restrict the number of hours you do in a week, so they can set a weekly budget of how much they want to spend. So really, there is no reason not to use the hourly rate with this feature now enabled on Upwork.

The hourly rate guarantees you get paid for the work that you do and the client can budget accordingly. It's a win:win situation!

I believe that the fixed priced rate will still remain in place, particularly for larger amounts of work, but the hourly rate will become the more popular option.

Always check the terms of service if you're unsure about your rights and obligations:

Quick Checklist BEFORE Taking On A Role:

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Aim for an hourly rate where possible (you can negotiate this, even if they have initially said fixed)
If the client insists on a fixed rate vs. an hourly rate, have them pay you an amount upfront, preferably 20-50%
Make sure clients are ‘payment verified' before even considering working with them. Without this, Upwork cannot take funds from their credit card or PayPal account, which means that they cannot guarantee payment

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Action Step

As a freelancer, you need to know fixed vs hourly rate differences in payment. Which one do you prefer?

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